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Me too! I've had problems with this from the start and it drives me nuts. The dealer says it doesn't exist and denies it just like the government and UFO's. My '91 Legacy pulls like a bull at low rpm but the Impreza just bogs out like a small 1.6 litre.
What's the answer? I know this engine has more grunt on the low-end than what it exhibits.

There is a fix you can try, which is very similar to 'Gary's Hesitation Fix'. I say similar, in that I have never had the opportunity to measure the value of the components in the fix. You'll have to do a bit of research on this one – I have never attempted this myself. However I can offer some informed advice (my background is in the field of electronics).

Please note that this fix will only work for the kind of hesitation brought on by an overly responsive knock sensor. It may not solve other types of hesitation.

To bypass the fix at any time, just plug the knock sensor's connector back into the ECU's (you shouldn't have to remove the ground connection if the values for the components are selected properly).

The simplest fix would be made up of two resistors. A better one would incorporate at least one capacitor as well – but that's beyond the scope for this exercise.
We will choose values of the resistors so that the knock sensor will be desensitized to a certain degree, while at the same time hopefully prevent the ECU from throwing a code and CE light.

During the experiment the ECU might throw a code (and flash the CE light) from time to time. To clear the code remove the negative battery cable and pump the brakes briefly to bleed current (ensures the residual voltage is brought to near zero). Wait about 10 to 20 minutes, after which the ECU will be ready to initiate a reset cycle on powerup. Start the car; you may need to start the car more than once before it catches. You may notice the idle hunts briefly before it settles (may take a minute or two). That would be normal and confirms a reset cycle had been made by the ECU (along with a cleared CE light). The car is now ready for more testing.

The experiment is methodical in approach, but it could also be long-winded. For some, it may not be worth all the effort. For others, the reward is hesitation cured, and we will have a fix that we can share with everybody. It's up to you. Alternatively, you can go ahead and just buy Gary's Fix ($50 USD each, IIRC).

Anybody who has already bought the fix could help out. Remove the fix and measure the resistances between the loop identifier and a) ground wire, b) ECU wire. [His fix could not have been patented. Therefore no infringement would have been made]

If not, let me know if anyone wants to try this. Rest assured, it would be a big commitment on my part as well.

What I get is a stumble at 3800 rpm, but only when I'm steady on the throttle around 3500 and then I get on the throttle quickly (like when cornering, or waiting to pass). Doesn't happen all the time, and it doesn't happen at any other rpm. I also get a loss of power when I pass through 4000-4200, like it just eases off by about 15hp, then comes back on as soon as I'm past it. This one happens only a couple of times a month. Very strange. Thought about taking it in, but I figured like all of the other intermittent problems that I've had with things I've owned, it would never happen unless they kept it for a few months.

Fred, your description of the problem is DEAD ON what I experience too!!!
I have the same issue, can't get it to repeat for the dealer.
So, "sorry, can't fix what isn't wrong".
Thanks for nothing guys.

I really feel there is an issue here.
1 month after I bought my car I drove another 2000 RS and it acted the exact same way.

I hate going full throttle from a stop light, and that's what I have to do to prevent this damn hesitation.

I am taking mine in for the 02 recall, we'll see if it helps, or if they even replace it.